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History of Income Tax In India and The Characteristics of Income Tax


 History of Income Tax In India

1.    In India, this tax was introduced for the first time in 1860, by Sir James Wilson in order to meet the losses sustained by the Government on account of the military Mutiny of 1857.

2.    In 1886, a separate Income Tax Act was passed. This act remained in force up to 1917, with various amendments from time to time.

characterestic of income tax



3.    In 1918, a new Income Tax Act was passed again it was replaced by another new Act which was passed in 1922. This Act remained in force up to the assessment year 1961-62 with numerous amendments.

4.    The income Tax Act was 1922 had become very complicated on account of innumerable amendments. The Government of India, Therefore, referred it to the Law Commission in 1956 with a view to simplify and for the prevention of tax evasion. The Law Commission submitted its report in September 1958, but in the meantime the Government of India had appointed the Direct Taxes Administration Enquiry Committee to suggest measures to minimise inconveniences to assesses and to prevent evasion of tax. This committee submitted its report in 1959. In consultation with the Ministry of Law finally the Income Tax Act, 1961 was passed.

5.    The Income Tax Act, 1961 has been brought into force with effect from 1st April, 1962. It applies to the whole of India And Sikkim (including Jammu and Kashmir).

6.    Since 1962 several amendments of far-reaching nature have been made in the Income Tax Act by the Finance Act every year.

7.    Besides this, amendments have also been made by various Amendment Acts, for instance, Taxation Law Amendment Act, 1984, Diect Taxes Amendment Act, 1987, Direct Taxes (Amendment) Acts of 1988 and 1989, Direct Tax Law (Second Amendments) Act, 1989 and at the Last Taxation Law(Amendment) Act, 1991. The amendments in the Finance Acts, 1922 and 1993, are mostly based on the recommendations of Chelliah Committee Report.

8.    As a report of fact, the Income Tax Act, 1961, which came into force on 1st April, 1962, has been amended and re-amended widely. It has, therefore, become very complicated both for the administering authorities and the tax-payers.


 CHARACTERISTICS OF INCOME TAX


History of income tax

1.    Direct Tax: Income is a direct Tax. Direct Tax means such tax which is paid by a person who bears tax burden.

2.    Central Tax: Income Tax is imposed and recovered by Central Government.

3.    Tax on Total Income: Income Tax is calculated on total income. Total income is also called taxable income. Total Income is calculated according to the provisions of Income Tax Act.

4.    Tax-Exempted Limit: If income exceeds prescribed limit of income, then TAX IS IMPOSED. Tax is not imposed upto the tax-exempted limit of income. Tax-exempted limit of income for the Assessment Year 2018-19, are as follows:
A.    Senior Citizen: Senior Citizen (resident in India), who is of the age of 60 years or more but less than 80 years Rs. 300000.
B.    Super Senior Citizen: Super senior citizen (resident in India), who is of the age of 80 years or more Rs. 500000.
C.    Other Individuals, HUF, Association of persons. Body of individual Rs. 250000.
D.   Firm, Company, Local Body : Nil.

5.    Progressive Tax Rates: Tax is not imposed at the same rate on the total income of an individual HUF, AOP or BOI. Tax rates increase with an increase in income. Minimum tax rate is 5% and maximum tax rate is 30%. Firms’ and companies, incomes are taxed at the rate of 30%.

6.    Surcharge: Surcharge is imposed on the amount of income tax. Surcharge rates are as follows for the assessment Year 2018-2019.
A.    For individuals, HUF, AOP or BOI: @ 10% if total income exceeds 50 lakh rupees but does not exceed 1 crore rupees. @ 15% if total exceeds 1 crore rupees.
B.    For firms: @12% if total income exceeds 1 crore rupees.
C.    For Domestic Company: @7% if total income exceeds 1 crore rupees but does not exceed 10 crore rupees. @12% if total income exceeds 10 crore rupees.

7.    Education Cess and Secondary and Higher Education Cess: All assesses are liable to pay education cess @2% and secondary and higher education cess @1% on the total amount of income tax including surcharge.

8.    Administration: Tax is imposed and recovered by income tax department. Income Tax Department works under the control of Central Board of Direct Taxes (CBDT).

9.    Tax Burden: Tax is imposed at progressive rate of income of individual and HUF therefore rich person bear more tax burden.

10. Allocation of Amount of Income Tax: The total amount of income tax recovered by government is allocated among Central Government and State Government will not be given any share of income tax revenue from the following amounts:
A.    Income Tax amount recovered from companies
B.    Amount of surcharge
C.    Amount of education cess and SHEC.

Hope you would have under stood the history of Income Tax and the characteristics of Income Tax.

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